The Finance Minister of Germany Christian Lindner recently warned that if the US kicked off a trade war with the European Union (EU), there could be retaliation, as detailed in a report by CNBC.
He further stated that “Trade controversy sees never winners, only losers,” Lindner told CNBC in an exclusive conversation on the sidelines of the International Monetary Fund’s annual meeting in Washington, DC.
What US trade policy could look like if Donald Trump were elected as president is a key issue, Lindner suggested. “In that case we need diplomatic efforts to convince whoever enters the White House that it’s not in the best interest of the US to have a trade conflict with the European Union. We would have to consider retaliation,” he said. Lindner belongs to the pro-business Free Democratic Party which is currently in coalition with Chancellor Olaf Scholz’s Social Democratic Party.
The US′ problem with trading lies with China rather than the EU, Lindner said, adding that the EU “should not become a negative side effect” of controversy between the US and China.
Trump has floated the idea of tariffs
Trump has floated the idea that, if he were elected, blanket tariffs of 10 per cent to 20 per cent could be imposed on almost all imports, no matter where they came from.
If such a 20 per cent tariff were implemented by the US, the EU’s and Germany’s gross domestic product would fall in the coming years, Reuters reported on October 24 citing a study by German economic institute IW. Trade is one of the main pillars of the German economy, suggesting heightened tensions, uncertainty and tariffs would hit the country harder than others.
Earlier this month, the German statistics office, Destatis, said that the US′ importance as a trading partner for Germany has been growing. The agency said that since 2021, the US had been the second-most important trade partner for Germany behind China, but in the first half of 2024, foreign trade turnover with the US was higher than that with China. In 2023, around 9.9 per cent of German exports went to the US, according to Destatis.
Trade tensions between the US and China, and the EU and China, have been rising throughout the year. Both the US and EU have implemented higher tariffs and on some goods imported from China, citing unfair trade practices.
China in turn has also announced higher temporary tariffs on some imports from the EU. Several probes and investigations into one another’s competition, subsidy, and other practices are also ongoing as the tit-for-tat measures continue.
After the EU voted to impose tariffs on Chinese-made electric vehicles, Germany’s Lindner urged the union not to start a trade war. Germany had previously advocated against higher duties, raising concerns about what they could mean for the country’s struggling carmakers.
Earlier in the week, Gita Gopinath, deputy managing director of the IMF, told CNBC that an escalation of trade and tariffs tensions between the U.S. and China would be “costly for everybody.”
Market participants and global investors will closely follow these developments and make informed investment decisions depending on how the relationships of top economies throughout the globe evolve.
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